Transcript Ethiopia`s Industrialization Drive under the Growth and

Ethiopia’s Industrialization Drive
under the
Growth and Transformation Plan
2010/11-2014/15
Kenichi Ohno
GRIPS
May 2011
Purpose
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Discuss and assess GTP in its early stage of
implementation in 2011.
Our main focus – industrial sector.
Perspective of international comparison of policy
methods – comparator countries include Singapore,
Taiwan, Korea, Malaysia and Thailand.
Summarize our previous HLF discussions from June
2009 to present.
Ethiopia’s
General Policy Orientation
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Strong policy ownership—visions and strategies are
homemade, not externally imposed.
Strong state guides the private sector away from
rent seeking and toward productive investment and
technology acquisition.
Internalizing skills and technology is top priority—
training, technology transfer and maximum local
procurement are required of industrial projects.
Expansion of policy scope as policy learning
proceeds—from simple incentives for a few export
products to broader support for more sectors with
more policy tools.
General Features of GTP
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Continuity and evolution—GTP is built on Ethiopia’s
past policy ideas and experiences including ADLI,
Industrial Development Strategy, SDPRP, PASDEP,
Democratic Developmentalism, etc.
Strong resolve of government to implement GTP is
visible. GTP will not remain a paper document.
With expanded policy scope and tools, GTP takes
up the challenge of bringing national development to
a higher and more difficult stage (including industry’s
key role in the economy).
General Features (cont.)
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Consultative drafting under MoFED with significant
revisions from first to final draft.
Visions, objectives and strategic pillars are clearly
stated (ch.2). The document is relatively lean with
various parts reasonably well connected.
While MDGs, social issues and governance remain
important, strong emphasis is placed on creation of
concrete sources of growth with policy support.
Numerical targets are set for chosen sectors (chs.58, Policy Matrix) for monitoring and evaluation.
Risks Associated with
Implementation
Three implementation risks are cited in ch.9:
1. Low implementation capacity—systems, administrative, human resources
2. Finance—low national saving and unpredictability of
external financing
3. Global market fluctuations
I would like to add three more:
4. Target rigidity
5. Problems with policy procedure and organization
6. Lack of dynamic response from the private sector
GTP’s Visions, Objectives and Strategic Pillars
Ethiopia’s
vision to
guide GTP
“To become a country where democratic rule, good-governance and social
justice reign, upon the involvement and free will of its peoples, and once
extricating itself from poverty to reach the level of a middle-income economy
as of 2020-2023.”
Vision on
economic
sector
“Building an economy which has a modern and productive agricultural sector
with enhanced technology and an industrial sector that plays a leading role in
the economy, sustaining economic development and securing social justice
and increasing per capita income of the citizens so as to reach the level of
those in middle-income countries.”
Objectives
1. Maintain at least 11% growth and attain MDGs
2. Education and health services for achieving social sector MDGs.
3. Nation building through a stable democratic and developmental state
4. Stable macroeconomic framework
Strategic
pillars
1. Rapid and equitable economic growth
2. Maintaining agriculture as major source of economic growth
3. Creating conditions for the industry to play key role in the economy
4. Infrastructure development
5. Social development
6. Capacity building and good governance
7. Gender and youth
GTP’s Chapters and Policy Matrix
Volume I – Main Text
Foreword, introduction, plan preparation and approval process (5)
Ch.1 Achievements and challenges under PASDEP (18)
Ch.2 Basis, objectives and strategic pillars (7)
Ch.3 Macroeconomic framework (10)
Ch.4 Financing (7)
Ch.5 Economic sectors development plan (39)
Ch.6 Social sector development plan (10)
Ch.7 Capacity building and good governance (15)
Ch.8 Cross-cutting sectors (gender, youth, labor, culture, environment, etc. 12)
Ch.9 Opportunities, risks and challenges in implementation (2)
Ch.10 Monitoring and evaluation (4)
Volume II – Policy Matrix
Text (3)
Policy matrix (35)
(Note: Numbers in parentheses indicate the number of pages in the English edition.)
The Industry Section of GTP
(Section 5.2)
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PASDEP 2005/06-2009/10—while real GDP growth
was 11% per annum, industry grew only 10%
against targets of 11-18%. Industry’s share in GDP
stagnated around 13%.
Three targeted exports (leather, garment, agroprocessing) did grow, but still small at $115m (3.8%
of total export) in 2009/10.
According to GTP, industry should play a key role in
the economy. Industrial growth should accelerate
over time with average annual growth of 20.0%21.3%. GDP share at end point should be 23.7%16.9% (base case & high case).
The Industry Section:
Four Strategic Directions
a) Micro and small enterprises (MSEs) development
This is expected to create jobs in urban areas and increase rural-urban and urban-to-urban
functional and economic linkages.
b) Medium and large industries development, which includes
1. Textile and garment
2. Leather and leather products
3. Sugar and sugar related industries
4. Cement
5. Metal and engineering
6. Chemical
7. Pharmaceutical
8. Agro-processing
c) Industrial zone development (for medium and large manufacturing industries)
d) Public enterprises management and privatization
The Industry Section:
Six Objectives
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MSE development
Full utilization of industrial capacity
Use of domestic raw materials and job creation (for
medium and large industries)
Increase in private sector investment
Employment generation, import substitution and
foreign exchange earnings
Local production of machinery and spare parts
Major Targets (Selected)
Sub-sector
Textile
Leather
Sugar
Cement
Steel & engineering
Fertilizer (urea)
Pharmaceutical
Agro-processing
Unit
Export earning in
$ million
Export earning in
$ million
Production in
million tons
Production in
million tons
Gross value-added
in million birr
Production in
million tons
Domestic market
share
Export earning in
$ million
Base year
2009/10
Target for
2014/15
Multiples
21.8
1,000
45.9 times
75.73
496.9
6.6 times
0.314
2.25
7.2 times
2.7
27
10 times
6
101.4
16.9 times
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300
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15%
50%
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35.2
300
8.5 times
Major Targets (cont.)
Sub-sector
Industry zones
Public enterprises
MSEs - job creation
MSEs - training of trainers
MSEs - training of
operators
MSEs - manufacturing land
MSEs - shades
MSEs - buildings
Base year
2009/10
Target for
2014/15
Multiples
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164
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2.26
5.32
2.4 times
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2,970
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10,000
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Number of trainees
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3,000
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Hectare
Number
Number
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15,000
21,591
819
-
Unit
Number of
factories in zones
Gross value-added
in million birr
Employment in
thousand
Number of trainees
Note: a complete list of annual targets are contained in the Policy Matrix (vol.II) of the GTP.
1. Issues Discussed in Our Policy
Dialogue Not Explicitly Reflected
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Shift from quantity to quality-based targets and
competition—GTP targets are mainly quantities.
Productivity, skills & technology are not featured in
strategic direction, objective or major targets.
Productivity tools such as kaizen (& benchmarking,
twinning) are not mentioned in GTP. Meanwhile,
TVET system and industrial zones are highlighted.
Gap between GTP text and Ethiopia’s strong belief
and action in skills, technology and productivity.
Difficult to see how and where kaizen
institutionalization can be aligned with GTP.
(Cont.)
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Metal & engineering discussions are not reflected.
- Metal—strengthen downstream, move upstream
subsequently; re-examine feasibility of Bikilal ore
- Identify substitutable metal products, esp. in power sector
- Capability building in basic elemental technology using
kaizen
- Questions remain about steel demand projection and
targeted import substitution ratios by sector
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Is this due to uniform way of GTP’s compilation
across sectors with emphasis on numerical
monitoring? Is quality an issue at lower level?
We hope points we raised will be taken up explicitly
in implementation processes and documents.
2. Growth Targets
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Real GDP growth of 11.2% (base) or 14.9% (high)
Industrial growth of 20.0% (base) or 21.3% (high)
Sub-sector growth (from 2009/10 to 2015/16)
- Textile export 46 times
- Leather export 6.6 times
- Sugar production 7.2 times
- Cement production 10 times, etc.
Causes of past growth performance is unknown:
(policy quality) + (private effort) + (external factors)
Productive sector—no linear relation between input
(investment) and output (sales); much depends on
quality, design, cost, marketing and global trends.
Numerical Sub-sector Targets
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GTP is a plan document that incorporates visions,
strategies and action plans in one. Sectoral and subsectoral targets are specified for ministries to
implement (annual targets in Policy Matrix).
Merit—easy to allocate works and monitor progress at
ministerial and directorate levels.
Demerit—rigid pre-set targets may bind policy
implementers (too high, too detailed, not adjustable…)
- Seeing trees but not forest; achieving numbers but
missing productivity and competitiveness.
- Worry, blame and buck-passing over unmet targets.
- Underachievement may be due to unrealistic targets,
negative shocks or weak private response to policy.
Caution with Targets
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Numerical targets are common in plan documents,
but their scope and levels must be chosen properly.
Targets should be indicative, not state orders that
must be attained by any means. Flexibility and
adjustments are needed.
Plan documents should set key sectoral targets only.
Initiative should be given to ministries and agencies
to decide sub-sectoral details in close consultation
with producers (cf. Malaysia, Thailand).
At high income level, countries do away with plan
documents (cf. Japan, Korea, Taiwan, Singapore).
3. Issues in Policy Capability
In Ethiopia, policy making procedure and organization
are still on the way to development. This seriously
affects implementability.
1. Speed over quality – proper steps and knowledge
are missing in making policies.
2. Policies are drafted by a few key persons without
systematic prior consultation with businesses and
relevant ministries. Receiving comments on already
drafted documents is not enough (cf. consensus
building in Taiwan, Singapore, Thailand…)
Policy Capability (cont.)
3. MOI should be given central authority and capability
(staffing, budget, etc.) to lead and coordinate industryrelated issues (trade, MSEs, productivity, etc.) Splitting
such functions across many ministries is not advisable.
Parallel mechanisms and forced competition among
them may cause delay and scattered knowledge (cf.
central policy authority in Taiwan, Malaysia, Thailand…)
4.MOI’s internal organization may be re-examined.
- Planning function should be concentrated in one
directorate (cf. IDB/Taiwan’s MoEA; SPD/Malaysia’s
MITI; DIP/Thai MOI).
- Avoid internal functional overlaps between directorates
and institutes.
Standard Policy Making Procedure
Top leader
1. Vision
2. Consensus
building process
3. Documentation
process
Brainstorming
Studies
& surveys
Set broad
goals &
direction
Drafting
work
Finalize
& approve
(May be
outsourced)
Stakeholder
consultation
4. Participation
Ministries
＆agencies
Comments
& revisions
Regions &
localities
Businesses
& bus. assoc.
4. Participation
Academics &
consultants
5. The entire process must be managed and coordinated by a lead ministry or agency.
Institutionalization of Kaizen
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We regard kaizen as the principal tool for raising
productivity and attaining GTP’s industrial targets. It
will be upgraded from project to movement.
MOI is designated as the lead ministry for kaizen.
Kaizen Pilot Project (phase 1) is completed.
Ethiopian Kaizen Institute (EKI) will be established
as core organization. JICA is assisting its design.
Remaining issues:
(i) kaizen’s role and status in GTP
(ii) concrete coordination mechanism with related
policies and programs (MSE strategy, TVET system,
urban extension service, etc.) is under discussion
Ethiopia: MSE Policy Organization
Source: Drawn by K. Ohno
based on interviews with
policy makers.
Prime Minister
Mr. Arkebe
(Advisor to PM
on MSE issues)
Council of Ministers
Ministry of Urban Dev.
& Construction
FeMSEDA
(To be restructured
& expanded)
Lead ministry
Policy coordination
TVET
(MoE)
City & Town
Offices (800)
Micro credit
(NBE)
Technical &
HR support
One-stop service
for MSE matters,
clusters, etc.
Credit
Malaysia: National SME Dev. Council
National SME Development Council
14 Other
Ministries
MITI’s key departments
Strategic Planning
Est. 2004,
chaired by PM
Ministry of Int’l Trade and Industry
(MITI, lead ministry for SMEs)
Implementing agencies under MITI
-SME Corp. Malaysia (lead agency for SMEs
and secretariat to National SME Dev. Council)
Entrepreneurship
Development
Sectoral Policy &
Industrial Service
Investment Policy &
Trade Facilitation
Services Sector
Development
-Malaysian Ind. Dev. Authority (investment)
-Malaysia Productivity Corp (research,
training, consultation)
-SME Bank (finance)
-Malaysian Ind. Dev. Finance (finance)
-MATRADE (trade)
Private sector partners
Service & training providers (private
consultants & companies)
Ethiopia: “Tatakidai” Proposal for NCC
Prime Minister
Direct, give mandate
Plan
National Competitiveness Council
Commission
studies, reports
Chaired by PM
Secretariat: PM Office
Members: concerned ministers,
business leaders, experts
Support, report, draft
Working groups for specific issues or sectors
MSEs
Kaizen
Clusters
TVET
Eng. Educ.
Secretariat:
MoUDC
Secretariat:
MOI
Secretariat:
MOI
Secretariat:
MOE
Secretariat:
MOE
Ministries,
businesses,
academics
Ministries,
businesses,
academics
Ministries,
businesses,
academics
Ministries,
businesses,
academics
Ministries,
businesses,
academics
Ministries and agencies
Implement
Note: This is a preliminary idea of K. Ohno to initiate discussion; listed issues and ministries
are suggestions only; everything is subject to addition, deletion or change.
4. Private Sector Mindset and
Lack of Dynamism
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To level up skills and technology, good policy and
strong private response are both needed.
Is the local private sector dynamic enough to respond
strongly to GTP? There may be less-than-expected
industrial performance due to weak private response.
PM Meles’ questions in our policy dialogue:
- Why do my people invest in urban properties instead of
building factories?
- How did East Asian governments steer private sector away
from speculation and rent seeking and toward investment in
manufacturing and technology?
- How did Japan and Korea absorb technology so quickly from
foreign-assisted industrial projects?
Malay Dilemma
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Malaysia feels that its indigenous Malay people are
less economically dynamic than Chinese or Indian
immigrants (Mahathir: 1970). The problem continues
to persist even after four decades of affirmative
actions toward Malay.
Despite reasonable policy quality, Malaysia is
trapped in middle income. In 2010, PM Najib
launched New Economic Model to energize local
SMEs toward value creation and innovation.
National Movement for
Mindset Change
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Apart from improving industrial policy, additional
policy to energize private actors is needed.
East Asian examples:
- Japan’s quality and productivity (kaizen)
movement (1950s-)
- Korea’s Saemaul Movement (1970s-)
- Singapore’s Productivity Movement (1980s-)
In Ethiopia, kaizen institutionalization holds the key.
Capability to create a policy package suitable for
Ethiopia should be strengthened.
Experiences of other countries should be studied to
extract key success factors.
Factors for Successful
Productivity Movement
National movement is not just a few projects; it is a comprehensive
drive with strong passion and deep commitment, involving everyone
from top to bottom and taking a decade or more to accomplish.
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Strong personal commitment of top leader
Establishment of core organization(s) responsible for
productivity improvement
Massive campaign (for mindset change)
Supporting institutions and mechanisms at central and local
levels
Authorized and standardized training programs and materials
for those concerned
Developing private sector capability, esp. fostering private,
productivity management consultants
Country-Specific Factors
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Drivers of Quality and Productivity Movement
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Degree of private sector dynamism
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Political drive is absolutely necessary, but economic incentives are
crucial to sustain the movement
Examples: domestically-driven (e.g., export drive of resource-poor
countries), externally-driven (e.g., FDI demanding local companies
for high-quality production capability)
Private sector capability in initiating, scaling-up, and sustaining the
movement
Absorptive capacity of new technologies, incl. educational and
training levels of general workforce
Level of technologies (depend on stages of development)
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Basics (5S, QC Circles, etc.)
R&D, technological innovation
Overview of Quality and Productivity
Movement (1): Factors for Success
Leadership
Core organization(s)
Japan
Singapore
Burkina
Faso
Botswana
○
○
○
○
△
△
△
(private)
(public)
△/×
(public
private)
Overview
of Productivity Movement (1): Factors for Success
Supporting
institutions
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(central and local levels)
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△
(national
movement)
(national
movement)
(partial)
Training programs and
materials
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Fostering private sector
capability
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(productivity mgt. consultant)
△
(fragmented)
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Massive campaign
(public)
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△
(not updated)
○
×
×
Overview of Quality and Productivity
Movement (2): Country-Specific Factors
Japan
Singapore
Burkina Faso
Botswana
Drivers of
productivity
movement
Strong
Domestic
Need for
export drive
(resourcepoor country
Strong
Domestic +
External
Perceived poor
work ethics
Need for FDI
attraction
(resourcepoor country)
Moderate
Domestic +
External
Need to
enhance
supply-side
response
during SAP
Moderate
Domestic
Perceived
poor work ethics
Need for
economic
diversification
(resourcerich country)
Degree of
private
sector
dynamism
Strong
Private
sector-led
national
movement
Moderate
Govt.-led
national
movement
Weak
Govt.initiated
movement
Weak
Govt.-initiated
movement
External
support
US & Europe
SAP: Structural Adjustment Program
Japan
WB/Japan
Singapore